Saturday, April 12, 2008

Looking Forward to Your Economic Stimulus Check? Too Bad it is Already spent.

When the Bush Administration announced earlier this year that they would be sending out economic stimulus checks to help revive the economy, it sounded like a good idea. What better way to pump some money back into the economy by giving us money to spend. Different people have different plans on what to do with it. Some will save it, some will pay off bills, some will go on vacation, and others will just go shopping. At least that is what they thought. Of all the businesses in the world, who are the last people that need an economic lift? If you said the big oil companies, you win the grand prize. They all reported record earnings this year, while airlines, hotels, restaurants, and retail stores reported dips in revenue. So by sending out checks to 130 million people would seem like a good start to putting money back into those companies. But instead of boosting local economies, we will in fact be boosting the oil companies already record profits. Isn't that lining the wrong pockets? let me explain:

The average person will be getting $600. Couples will get $1200 with an additional $300 per kid, up to 3 kids (I think it is up to 3...maybe it is 4). So for example purposes, I will use my family.

Based on the numbers above, my wife and I would get $2100 for us and our 3 kids. We own 2 cars. One of them costs on average about $60 a week to fill up the gas tank. The other car does not drive very far and only costs about $70 a month in gas. So between the 2 cars, that would be $310 a month spent on gas. Times that by 12 months and you get a total of $3720 a year for gas. That is $1620 more than what we are getting in our rebate. Plus, these numbers are low in comparison to the rest of the country. Most families own 2 cars, and probably pay more than the $310 we spend. Now I know what you are thinking. That we would be paying that even without the refund checks, so in reality, we are actually still saving money by getting the gift from the government. But my numbers are based on what we pay currently...with a total conducive to those numbers remaining current for the rest of the year. The problem is, gas prices are going to rise...and rise a lot throughout the year. So my point is that the Government is "giving" us this money, and we will be turning around and giving it to big oil companies, who as mentioned earlier...are the last people that need it. Did all of that make sense or did I just give everyone a big headache :)

But I would like to take this a step further. I did some research, and found out some things you may find interesting. Let me start with a couple of quotes. The first is from Energy Secretary Sam Bodman, and appeared in the Bloomberg news on March 5, 2008. He said the following:
"They see speculation in the market, I see decline in global inventories. I don't think this is a big surprise, that we've had a jump in price when there has been a decrease in crude inventories"
The second quote is from President Bush, and appeared in the Associate Press on that same day:
"It should be obvious to you all that the [gasoline] demand is outstripping supply, which causes prices to go up"

So why do I mention those quotes, and what do they have to do with my topic? I'm glad you asked. According to a recent article in Business week, there is no gas shortage. Gasoline reserves on hand are at the highest levels since the early 1990's, which is remarkable considering the nations refineries have been cutting back on the production of gasoline because their margins have declined. In fact, average gasoline reserves on hand have risen since this past October, while oil reserves in this country have gone up every week this year. So Energy Secretary Bodman's comments are at the very least "less than truthful".

President Bush goes on to tell us that demand is higher than supply, so of course prices are going to go up. The truth of the matter is that demand is DOWN, yet prices are still UP. Just so we can all get on the same page, here are the verifiable facts on oil supplies, production, and gasoline demand, according to the same Business Week article: In January of this year, the U.S. used 4% less petroleum than we did a year ago. [Oil demand was down 3.2% in February.] Furthermore, demand has been falling slowly since July of last year. Ronald Bailey of Reason Online has pointed out that worldwide production of oil has risen 2.5% in the first quarter, while worldwide demand has grown by only 2%. Production is expected to increase by 3.3% in the second quarter, and by as much as 4.1% by the third quarter. The net result is that the U.S. daily buffer for oil production against demand, which was a paltry 1.5 million barrels as recently as 2005, is now up to 3 million barrels in excess capacity today.

So what is going on here? Why would our Energy Secretary say there's a supply and demand problem when none exists? Why would he say that speculators have little or nothing to do with the incredibly high price of oil and gasoline, when it's clear they do? President Bush -- a former oilman -- gives the ever-growing demand for gasoline as the primary reason prices are so high, yet that notion can be dispelled with one minute of research. That's the problem with rhetoric; it rarely matches the facts. Again....at the very least, President Bush made a comment that seems to be "less than truthful". But is anyone really surprised by that?

So what have learned today? We have learned that there is no gas shortage, and fuel demand is actually down. Yet gas prices continue to rise at a disgusting rate, which in turn is going to cause us to use our stimulus checks on filling up our cars. So if you were looking forward to that new plasma TV, or a trip to the Bahama's, think again. Your check is already spent.

2 comments:

Anonymous said...

And I still haven't heard a good explanation from the oil companies on why they're turning record profit's each quarter!!

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